[TusharK]

According to a media report, new car sales have taken a hit as demand from cab aggregators like Uber and Ola has gone down by 50% over the past two years. Car makers are expecting this trend to continue.



The sluggish demand can be attributed to cab hailing services struggling to gain traction in smaller towns and cities. To boost profitability, companies have reportedly reduced incentives for drivers. As incentives have gone down, driver partners are facing difficulties repaying loans. New third-party insurance norms have also affected sales.

It is estimated that 50,000 vehicles were sold to cab aggregators in the first 8 months of the current fiscal. In comparison, 75,000 cars were sold in the last financial year and 1.5 lakh units two years ago. Reports suggest that Maruti Suzuki sold 25,000 vehicles to cab aggregators in the first 8 months of FY2018, compared to 72,000 in all of FY2017. Hyundai is also witnessing a slowdown. 5% of the company's total volumes is fleet sales of which, 60% constitute vehicles sold to cab aggregators.

Source: Economic Times

Link to Team-BHP News

[tarik.arora]

It was foolish to expect cab sales to grow at the same rate as 2016 or 2017. The aggregators were giving crazy incentives to the drivers and fares were damn cheap. The companies were infusing and draining money. The per km fare was unbelievable as owning and maintaining a car is not as cheap as the fares made it look like. It was only a matter of time that the incomes started declining and fares started to increase. Reality strikes and it strikes hard!

It is understandable that the driver class was falling for this trap but how can big companies expect that such things will continue for long? The overall acceptability of cab hiring has improved by a fair margin and the fleet is bound to grow but not at a rate that we saw in 2016. The growth will more or less stabilise from here and we will see realistic growth number. Unless, someone derives a way to expand cab penetration in Tier III & IV cities.

[libranof1987]

This was bound to happen. The app-based taxi honeymoon has come to an end; fares are going up, driver earnings are going down and the experience isn't as smooth or premium.

Worse, with lower earnings, drivers will be keen on retaining their cars longer than earlier when they could buy a new one while retaining the older one and employing a driver/selling it off to increase their earnings.

Unlike in other countries where Uber controls the age/condition of the car, there isn't a need for drivers to make sure they have the best/latest model. So, we'll continue to get battered Indicas and DZires.

Originally Posted by tarik.arora

Unless, someone derives a way to expand cab penetration in Tier III & IV cities.

Yes; there can be potential there. But it'd have to be dirt cheap, to compete with existing modes of transport in most such towns; autos/Jeeps transporting 50 people and charging <10 rupees. Even in Tier-2 cities, the typical cars on Ola are most likely discards from bigger cities.

Self-drive rentals are a promising avenue to generate sales growth but it clearly hasn't been as smooth as app-based taxis.

[avishar]

I don't think 25000 less cars over 8 months has much to do with the current slowdown. Eight months is more than 2 million cars worth of sales, 25000 is 1.25 percent of it.

What is interesting to note that for Hyundai only 5 percent of new cars sales are to fleets. Which is astonishing considering that in developed countries almost 50 percent of car sales are fleet sales, with private sales being a minority in many countries. Those countries are may more susceptible to market forces and which is the reason why car markets in such countries collapse to historical lows whenever there is a recession. I think it augurs well for India, that such a large part of the demand for new cars is organic, and coming from private sales! Quite heartening.

[ashis89]

Originally Posted by libranof1987

Unlike in other countries where Uber controls the age/condition of the car, there isn't a need for drivers to make sure they have the best/latest model. So, we'll continue to get battered Indicas and DZires.

When these app based service providers came to India, I read somewhere that the drivers need to have cars which are no more than 2 years old to register on their platform. Not sure if this is rule has been done away with now. Also I don’t remember if there was any ‘expiry’ year or kms for the cars once they are registered.